Fed slashes federal funds rate

The Board of Governors of the Federal Reserve System today released the following statement:

"The Federal Open Market Committee has decided to lower its target for the federal funds rate 75 basis points to 3.5%.

"The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets.

"The Committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully.

"Appreciable downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.

"In a related action, the Board of Governors approved a 75-basis-point decrease in the discount rate to four percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Chicago and Minneapolis."

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The Board of Governors of the Federal Reserve System today released the following statement: